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+91 8600544422Nidhi Company Registration
Nidhi Company is one of the simple and easiest options to start a lending and borrowing business in India without RBI approval. It is engaged in the business of accepting deposits and providing loans to their members only and prohibits dealing with non-members.
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Nidhi Company Registration
Nidhi Companies are basically Non-Banking Financial Companies (NBFC) that are engaged in the business of accepting deposits and providing loans to their members. It is a company formed with the exclusive object of cultivating the habit of thrift, savings, and functioning for the mutual benefit of members by receiving deposits only from individuals enrolled as members and by lending only to individuals, also enrolled as members, it restricts dealing with individuals who are non-members.
The primary object of Nidhi Companies is to carry on the business of accepting deposits and lending money to member-borrowers against jewels, immovable property, fixed deposit receipts, National Savings Certificates, other Government Securities and insurance policies etc. Nidhi Companies are not allowed to engage themselves in the business of Chit Fund, hire purchase, insurance, or in any other business including investments in shares or debentures.
Nidhi companies are incorporated in the nature of a Public Limited company and hence, they have to comply with two sets of norms, one of Public limited company as per Companies Act, 2013 and another is the Nidhi Rules, 2014. Nidhi Company is a class of Non-Banking Financial Company (NBFC) and the Reserve Bank of India(RBI) has powers to issue directions and make rules for deposit-related activities. But, as Nidhi Companies deal with shareholder-members only, RBI has exempted them from the provisions of the RBI Act and other directions applicable to NBFCs. Nidhi Company is also known as Mutual Benefit Society.
Features of Nidhi Company Registration
Dealings with members only
- Nidhi Company is allowed to carry on business (lending and borrowing) only with its members and with nobody else. So, before accepting deposits or lending loan to any person, it shall induct such person as a member/shareholder of Nidhi Company
- A Nidhi Company shall not induct a body corporate or trust or a minor person as a member.
- There shall be a minimum of seven (7) members at the time of incorporation, there is no maximum limit on the number of members. After 1 year of incorporation, Nidhi shall ensure that its membership is not reduced to less than 200 members at any time.
- The Directors of Nidhi Company shall also be its members.
Name and Object of Nidhi Company
- In order to differentiate Nidhi Companies from other Public Limited Companies, it would require to add the words “Nidhi Limited” as a suffix in its name.
- The object of the company shall be cultivating the habit of thrift and savings amongst its members, receiving deposits from and lending to its members only for their mutual benefits.
Deposits
- Nidhi Company may accept deposits from members in the form of Savings Deposits, Fixed deposits (FD) and Recurring deposits (RD)
- Savings Deposits Account: The interest on savings account shall not exceed 2% above the rate of interest payable to savings bank account by nationalized banks and the maximum balance in any savings deposit account at any given time qualifying for interest shall not exceed Rs. 1,00,000/-
- Fixed Deposits: Fixed deposits shall be accepted for a minimum period of 6 months and a maximum period of 60 months.
- Recurring Deposits: Recurring deposits shall be accepted for a minimum period of 12 months and a maximum period of 60 months. (In case of recurring deposits relating to mortgage loans, the maximum period of recurring deposits shall correspond to the repayment period of such loans granted by Nidhi)
- The interest for fixed and recurring deposits shall be at a rate not exceeding the maximum rate of interest prescribed by RBI which the NBFC can pay on their public deposits.
Loans
- Nidhi Company shall only give secured loans to its members against gold, silver, jewellery, immovable property, fixed deposit receipts, National Savings Certificates, Government securities, and insurance policies.
- Loan against gold, silver, and jewellery: The Repayment period of such loan shall not exceed one year.
- Loan against Immovable Property: The loan shall not exceed 50% of the value of the property offered as security and the period of repayment of such loan shall not exceed 7 years.
- Loan against fixed deposit receipts, National Savings Certificates, Government Securities, and insurance policies: These securities shall be pledged with Nidhi Company till the tenure of loan or one year (whichever is earlier). However, in the case of a loan against fixed deposits, the period of loan shall not exceed the unexpired period of the fixed deposits.
- The rate of interest to be charged on any loan given shall not exceed 7.5% above the highest rate of interest offered on deposits by Nidhi and shall be calculated on reducing balance method
- A member shall not be eligible for any further loan if he has borrowed any earlier loan from the Nidhi and has defaulted in repayment of such loan.
Branches
- Nidhi Company may open branches if it has earned net profits after tax continuously during the preceding 3 financial years.
- It may open up to 3 branches within the district.
- If a Nidhi proposes to open more than 3 branches within the district or any branch outside the district, it shall obtain the prior permission of the Regional Director (RD) and an intimation is to be given to the Registrar about the opening of every branch within 30 days of such opening.
Advantages Of Nidhi Company Registration
Suitable for Middle Class and Lower Middle-Class people
Nidhi Company mobilizes small savings, mostly from the middle class, and lower-middle-class citizens, and disburses loans to eligible borrowers. Owing to their small size and closeness to the customers, the disbursement of loans is speedy. This is especially useful in cases where the borrower is in urgent need of funds.
No restriction on number of members
Nidhi company is a public limited company and therefore there is no prescribed limit for the maximum number of members. It can have as many shareholders as its share capital can accommodate.
Minimum capital requirement
The minimum capital required for incorporation of a Nidhi Limited is Rs. 5 lakhs as per Nidhi Rules 2014. Therefore, the capital required for Nidhi company is very less as compared to NBFC Registration, where the capital required for registration is at least Rs. 2 crores
Secured Loans to its members
Nidhi Company is allowed to provide secured loans against jewellery, immovable property, fixed deposit receipts, National Savings Certificates, Government Securities and insurance policies to its members. Therefore, repayment of such loans is guaranteed, as the loans are secured and due to peer pressure, borrowers ensure that the loan is repaid on due dates.
RBI Regulations not applicable
Nidhi Company carrying out financial activities falls under the NBFC category, but it does not require any special permission from the Reserve Bank of India (RBI) for registration. Also, it is not required to comply with RBI directions or rules for the conduct of business, unless specifically required. It has to comply with the Companies Act and Nidhi Rules for the conduct of business.
Professional management
The Board of Directors and management of a Nidhi company normally consists of senior persons who have experience in handling finances and who are well respected in social circles. This lends credibility to the institution and imparts confidence in the minds of borrowers and depositors.
Perpetual succession
A company has ‘perpetual succession’, that is continued or uninterrupted existence until it is legally dissolved. They are not affected by the death of one of its shareholders, but the shares are transferred to his/her kin or legal heir and the company continues to run its business as usual. In the case of a director’s death, the Board of Directors has the power to fill the casual vacancy.
Conditions and Restrictions for Nidhi Company Registration
CONDITIONS TO BE COMPLIED AFTER REGISTRATION OF NIDHI LIMITED COMPANY
Every Nidhi Company has to ensure that the following conditions are fulfilled within a period of 1 year from the date of incorporation :
- It should have a minimum of 200 members/shareholders
- It should have minimum Net Owned Funds of 10 lakh rupees or more (Net owned funds would include a sum of Equity Share Capital + Free reserves – Accumulated Losses – Intangible Assets)
- The ratio of Net Owned Funds to deposits shall not be more than 1:20 (A Nidhi Company shall not accept deposits exceeding 20 times of its Net Owned Funds (NOF) as per its last audited financial statements.)
- Unencumbered term deposits of not less than 10 percent of the outstanding deposits (At least 10% of the funds deposited in the Nidhi should be kept in a Nationalised Bank in the form of unencumbered Fixed Deposit Receipts and the remaining 90% should be used for business purpose)
RESTRICTIONS ON NIDHI LIMITED COMPANY
A registered Nidhi Limited Company shall not carry out the following activities –
- Business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by any body corporate
- issue preference shares, debentures, or any other debt instrument
- Open any current account with its members
- Accept deposits from or lend to any person, other than its members
- carry on any business other than the business of borrowing or lending in its own name
- Pledge any of the assets lodged by its members as security
- Take deposits from or lend money to any body corporate.
- Enter into any partnership arrangement in its borrowing or lending activities
- Issue or cause to be issued any advertisement in any form for soliciting deposit.
- Acquire another company by purchase of securities or control the composition of the Board of Directors of any other company in any manner whatsoever or enter into any arrangement for the change of its management, unless it has passed a special resolution in its general meeting and also obtained the previous approval of the Regional Director having jurisdiction over such Nidhi Company.
Minimum Requirements For Nidhi Company Registration
Minimum 7 Shareholders
Minimum 3 Directors
At least 1 Director shall be a permanent resident of India
Minimum capital of 5 lakh Rupees
DIN & DSC’s for all Directors/Shareholders
What Is Included In Our Nidhi Company Registration package?
Company name search and approval
Digital Signature Certificate (DSC) for 7 Director/Shareholder
Director Identification Number (DIN) for 3 Directors
Certificate of Incorporation/Registration
Company PAN and TAN
Memorandum (MOA) and Articles (AOA)
Supporting Document for opening Bank Account
Employees State Insurance Corporation Registration (ESIC) and Employees Provident Fund Registration (EPFO)
Professional Tax Registration (For Companies registered in the state of Maharashtra and Karnataka only)
Company Master File Kit
Nidhi Company Registration Process
Application for Name Approval
You have to provide 2 different names and main objects for the proposed company which shall be submitted to MCA for approval, out of which one name will be approved. If the initial 2 names are rejected, then we can apply further 2 names as a resubmission. Names provided should ideally be unique and suggestive of company business, it should end with the word “Nidhi Limited”.
Application for Digital Signature Certificate (DSC)
Once the name is applied, we shall apply Digital Signature Certificate (DSC) for shareholders and directors in order to digitally sign the forms. If the directors/shareholders already have DSC, then this step can be skipped.
Final Submission of SPICE+ forms along with MOA and AOA
After the name is approved and DSC is generated, we need to prepare and submit incorporation application in SPICE+ forms along with Memorandum of Association (MOA), Articles of Association (AOA), and AGILE form for final approval.
Get incorporation Certificate, PAN, and TAN
It typically takes 3-5 days after final submission to get the incorporation certificate. Incorporation certification is a proof that the company has been registered. PAN, TAN, ESIC, EPFO, Professional Tax registration certificate will also be received simultaneously.
Opening of Bank Account
You can submit the Incorporation certificate, MOA, AOA, PAN, TAN, and other required documents to the bank to open your current account and start the business operations.
Documents Required in Nidhi Company Registration
List of documents to be submitted by the Director and Shareholders
Following are the documents that are required to be submitted by all the proposed directors and shareholders of the company. All documents submitted should be valid and readable.
- Scanned copy of PAN Card or Passport (Foreign Nationals & NRIs)
- Scanned copy of Aadhaar Card/Voters ID/Passport/Driving License
- Scanned copy of Latest Bank Statement/Telephone Bill/Post-paid Mobile Bill/Electricity Bill (The address proof shall be recent and not older than 2 months)
- Scanned passport sized photograph
In case of foreign nationals or NRI Director and Shareholders, documents list can be checked here
Registered Office Proof
Private Limited Company should have a registered office place in India. The office address can be residential or commercial premises. The address proof shall be recent and not older than 2 months. Following are the list of documents to be submitted as Registered Office Address proof –
- Scanned copy of utility bill such as Electricity bill/Mobile Post-paid bill/Landline Post-paid bill/Gas bill/Water bill
- Scanned copy of No-objection Certificate from property owner or whose name appears on such utility bill
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